Sources for Objective Information on Home Mortgages

[john_pifer]

My wife and I are just starting the process of looking into getting our first house (great timing, yeah, I know) and, while I’ve bought several cars, home buying seems like a totally different ballgame, and, admittedly, I’m pretty ignorant on the subject.

Obviously, we’re going to need to borrow the vast majority of the money to buy a home.

I know we have a lot of homeowners here, and, I’m quite sure that many of you guys have bought and sold multiple homes.

So, any advice on the subject is appreciated.

I am a member of a local credit union. Would it be a good idea to apply and get pre-approved for a mortgage for up to a certain amount?

Anyone know some good websites that would provide some objective, unbiased information about mortgages and home buying? I’ve looked a little bit, but many sites are just wanting me to enter my information and apply for a mortgage.

I don’t want to apply for a mortgage through a bunch of different banks - I just want a source of objective information about the ins and outs of mortgages and home buying.

It seems to me that there is a lot of hype and “conventional wisdom” surrounding home-buying, a lot of which may not be accurate. My wife and I want to educate ourselves.

I know a lot of people’s first step is contacting a realtor. I’ve never dealt with a realtor, obviously, and I’m well-aware that they would naturally have an interest in steering potential buyers a certain direction, for their own benefit. I realize that they’re in it to make a profit, which is fine. I don’t have a problem with that. I’m just not interested in having one make his year on me!

Thanks guys.

 

[methusaleh]

Are you and/or your wife a veteran? Consider a VA loan. That’s what I did for my current house. They didn’t ask for much for a down payment; one stipulation of the loan was that it had to be my primary residence for at least the first seven years. I believe that’s changed recently, possibly to five years or less.

I’d steer you toward a broker. One stop shopping for a bunch of offers. More often than not you’ll find the broker can arrange little changes in your favor here and there. Much easier, and faster, to negotiate compared to a bank.

I tried the traditional bank route at both of the institutions that I use. The message was the same at each bank: “here’s what we are offering you, take it or leave it, offer expires in 72 hours.” Absolutely no room for discussion or change. It left a bad impression on me.

 

[john_pifer]

We’re not veterans, no.

 

[FowVay]

Mortgage loans aren't that much different from any other type of loan. You pay closing costs when you close on the transaction and you can pay down your interest rate with discount points so read up on that. Have a plan in mind for your future and whether you plan on staying in the home for any length of time or if it's just going to be a short term (less than 5 years) proposition. This will determine how long you should finance and what you should do with your discount points.

Many people refinance their mortgages frequently. I note that interests on a simple interest mortgage is collected heavily in the early years of the loan. So nearly all of your payment during the first 5 years goes more toward interest than it does toward principle. So for people who continuously refinance in the first 5 years of their loans end up paying nearly all in interest and nothing toward their principle debt. That's just something to think about when you decide on your interest rate, your loan length and your families future housing.

If you plan on getting out in a few years than pay as little as possible with long terms. If you're going to live there forever then get that thing paid off and save on the interest rate. It really isn't a one-size-fits-all proposition but with a little thought and planning you will make the best decision for your family.

Congratulations on your first new home!

 

[ET16]

Mortgage Professor: Standard and Reverse Mortgage Guidance

Standard and Reverse Mortgage Calculators, Shopping, and Advice from The Mortgage Professor

www.mtgprofessor.com

 

[Cujet]

I used a construction loan that converted to a mortgage to build my current house. It was a very interesting and excellent process. The interest rate during construction was very high (about 8. something) , but it mattered very little as the initial payments were tiny. They only grow as the builder draws from the funds to construct. The final 2 months had something that resembled a regular payment.

Once I moved in, the interest rate reverted to the agreed upon 30 year rate.

It may not be what you are looking to do, but I found it to be a great way to build what I wanted, where I wanted, and I saved a fortune by finishing the inside myself and purchasing the appliances. Thereby keeping a number of large expenses out of the mortgage.

It also allowed me to hire the local tile guys as I could afford it.

I had the house built for $157K in 2002. Even back then, that was a flat out bargain.

 

[Graham Piccinini]

In for the info, as I'm in the same boat. Have been home shopping for months. Budget is quite limited, so I get outbid on nearly every home, despite offering more than the asking price. (Love the Charlotte house market...not.) Gave an offer on another one last night, praying for good reply from seller.

I have been pre-approved, just trying to see if maybe there are better mortgage options. In my case my realtor got me linked up with a loan officer that she often works with. I'm currently pre-approved for USDA with 100% financing. Catch seems to be a little bit more paperwork, and home has to be in rural-ish area. Can't remember if the "must live for 5 years" thing still applies...
Many of the homes that I've looked at (and that were USDA approved) were within 10-15 min from "civilization", and in a country setting. WIN-WIN for me though, as I hate HOA with passion.

 

[55hambone]

Check out this article from Clark Howard to get started: https://clark.com/homes-real-estate/how-to-get-a-mortgage/. His website will have other useful information for the homebuying process as well. He isn't selling anything (although his website has ads from other parties to keep costs down) and his explanations are easy to understand. In my experience he gives good, solid, unbiased advice. Let me add my two cents about buying a home right now. If you have a job that could require relocation, it may be best to rent until the housing market returns to some kind of normal. You could end up owing more than you could sell it for if you have to move.

 

[BMWTurboDzl]

When documenting assets for the down payment try to provide the lender with documentation which doesn't show a lot of large deposits and transfers because it can cause you headaches down the road if the lender wants sourcing. Large deposits typically are amounts greater than 50 percent of your total qualifying income. If you're using a retirement account or equities for the down payment you may have to document liquidation. Gift funds will require a gift letter (basically states gift not a loan) and proof of transfer to either you or the settlement agent.

If you're self-employed do NOT provide state income tax returns. Only provide federal.

Some lenders have access to streamlined approvals where your assets, income/employment are verified via third-party sources (ex, TheWorkNumber, internal bank deposit records).

Do NOT quit your job prior to closing. If you have a new job lined up disclose that to the lender. It's not a big deal as you'll be qualified off the income on the offer/acceptance letter and it will save your lender headaches down the road.

Do NOT take on new debt until after you've bought the house. No car loans, no financing of smartphones, etc.

These last two may seem rather obvious but it happens all the time.

I know this isn't what you were looking for specifically but I thought it may be helpful with regards to expectations.

 

[Vil_Riker]

What you are thinking is on point.

1. Get a realtor to be your agent. While you can buy a house on your own, the process is somewhat complex and a good realtor will advise you during the process.
2. Contact the credit union and get pre-approved for the mortgage. It doesn't matter much which institution you get your mortgage from but going through the credit union you know will make things easier.
3. Do not skimp on the inspection of the property. The real estate agent will have recommendations on who to hire.

Good luck!

And remember, there are three things that are important for real estate - location, location, location.

 

[Graham Piccinini]

And remember, there are three things that are important for real estate - location, location, location.

Over the last few months I've been completely drained mentally from these constant home searches. Must've scrolled through at least 1000-1500 houses, and physically looked at 100+. During this time it really hit me that an average or below average home buyer has three things in play, from which he/she can only have two.
1) Condition of the house.
2) Location of the property.
3) Good price. (By good I mean 20K-60K below average in the area. But bidding wars usually close that gap quick.)
No matter how I play my cards, can't get the stars to line up to hit all 3 of these... Either the price is great, in good area, but house is a wreck. Or great house with yummy price, but area is more than questionable... Either population-wise, or driving distance/time absolutely kills any house price savings with increased fuel expenses. Or the last and most common one - house is great, location is great, but price is way up there.

P.S. How do I win a lottery?

 

[Leo99]

It might vary by state but most real estate agents are paid by the seller. The seller pays 6% commission. That 6% gets split 4 ways. 1.5% each to the selling agent, selling broker, buying agent, and buying broker.

Title insurance is a big scam but there's no way out of it. You'll pay for a title search to ensure that the property is unencumbered and no one else has a claim to the property and then you'll pay insurance in case the title search wasn't accurate or complete.

The bank basically thinks that they can sell your house real quick for 80% of the appraisal. So, if you have less than 20% equity, they make you pay private mortgage insurance (PMI).

Get CreditKarma or similar and check your credit score and clean that up if needed. Pay off your credit cards before applying for a mortgage.

Some states/regions use attorneys for closing and some use title companies.

 

[BMWTurboDzl]

It might vary by state but most real estate agents are paid by the seller. The seller pays 6% commission. That 6% gets split 4 ways. 1.5% each to the selling agent, selling broker, buying agent, and buying broker.

Title insurance is a big scam but there's no way out of it. You'll pay for a title search to ensure that the property is unencumbered and no one else has a claim to the property and then you'll pay insurance in case the title search wasn't accurate or complete.

The bank basically thinks that they can sell your house real quick for 80% of the appraisal. So, if you have less than 20% equity, they make you pay private mortgage insurance (PMI).

Get CreditKarma or similar and check your credit score and clean that up if needed. Pay off your credit cards before applying for a mortgage.

Some states/regions use attorneys for closing and some use title companies.

Just to add..

While not a scam title insurance protects the lender not the homeowner. The homeowner will have to buy title insurance if they want to protect themselves.

 

[wpod]

I would get a fixed rate loan.

 

[Vil_Riker]

Over the last few months I've been completely drained mentally from these constant home searches. Must've scrolled through at least 1000-1500 houses, and physically looked at 100+. During this time it really hit me that an average or below average home buyer has three things in play, from which he/she can only have two.
1) Condition of the house.
2) Location of the property.
3) Good price. (By good I mean 20K-60K below average in the area. But bidding wars usually close that gap quick.)
No matter how I play my cards, can't get the stars to line up to hit all 3 of these... Either the price is great, in good area, but house is a wreck. Or great house with yummy price, but area is more than questionable... Either population-wise, or driving distance/time absolutely kills any house price savings with increased fuel expenses. Or the last and most common one - house is great, location is great, but price is way up there.

P.S. How do I win a lottery?

Yes, it's difficult to get all 3 unless you come across the holy grail - death, divorce or relocation. But there are others chasing the same deal so unless you are an insider, it's going to be difficult to hit this.

You might compromise on point 1 if you are good with renovation work. Best case would be a cosmetic condition that looks horrible but actually is not a big deal. You will need to have an understanding what these situations are, though.

 

[JeffKeryk]

I chose a different path to mortgage strategy. My goal has always been to minimize interest expense and gain equity.
This was achieved with the help of a great mortgage broker.
The most important thing is getting the right property; buy in the best location you can because it will be more immune to the inevitable down turns.
Are you planning to stay or is this a 5 year starter house?
A strong down payment gets you started with equity, which is leverage.
I generally took variable, 5 to 7 year fixed to adjustable mortgages and refied when rates went down or I was within a year or 2 of the adjustment to start.
I always made the biggest payment I could; I treated the lower interest rate like a 15 year fixed.
There were times I re-fied within months. Always take a no cost zero point loan. Your money needs to go against the principal!

Of course there is risk in this stragegy.
If you are not financially disciplined this is not for you. I drove Toyota strippie pickups and used Hondas until I paid off the house.
If your house drops in value and your equity drops below a threashold, it becomes tougher to refinance.
You may end up with a higher rate if you cannot refi, but you have had 3 to 5 years of lower interest expense so you are ahead of the game.
Cash is King. Keep a rainy day fund.

Now I have been out of the mortgage game for awhile, so I am not familiar with current rates. A good fixed has lots of plusses. Educate yourself.
To recap, my goal has always been to minimize interest expense and to ultimately have no mortgage. I hate mortgages and loans in general.
This strategy, with the help of an excellent broker, worked for me.

Remember, a good mortgage is a good thing. It allows you to gain an appreciating asset with other people's money. Get the right asset!
Good luck and have fun with it.

 

[Donald]

My wife and I are just starting the process of looking into getting our first house (great timing, yeah, I know) and, while I’ve bought several cars, home buying seems like a totally different ballgame, and, admittedly, I’m pretty ignorant on the subject.

Obviously, we’re going to need to borrow the vast majority of the money to buy a home.

I know we have a lot of homeowners here, and, I’m quite sure that many of you guys have bought and sold multiple homes.

So, any advice on the subject is appreciated.

I am a member of a local credit union. Would it be a good idea to apply and get pre-approved for a mortgage for up to a certain amount?

Anyone know some good websites that would provide some objective, unbiased information about mortgages and home buying? I’ve looked a little bit, but many sites are just wanting me to enter my information and apply for a mortgage.

I don’t want to apply for a mortgage through a bunch of different banks - I just want a source of objective information about the ins and outs of mortgages and home buying.

It seems to me that there is a lot of hype and “conventional wisdom” surrounding home-buying, a lot of which may not be accurate. My wife and I want to educate ourselves.

I know a lot of people’s first step is contacting a realtor. I’ve never dealt with a realtor, obviously, and I’m well-aware that they would naturally have an interest in steering potential buyers a certain direction, for their own benefit. I realize that they’re in it to make a profit, which is fine. I don’t have a problem with that. I’m just not interested in having one make his year on me!

Thanks guys.

Talk to credit union. They have guides or seminar or video for first time home buyers. They are your friend. I am pretty sure the lending officer is an employee not on commission. The mortgage brokers are on commission. Bank lending officers probably not on commission either.

Pull your own credit through Credit Karma and Experian (all free). Review the credit reports from all three credit bureaus. Correct errors.

Only FICO scores count. Forget Vantage. People use Vantage who do not want to pay a FICO licensee fee.

You have a period of about 3 weeks where all mortgage applications that pull a credit report will look like a single pull of your credit report.

While interest rates are high compared to a year or two ago, they have been a lot higher in previous times.

Try to put down 20% and avoid PMI.

 

[tbm5690]

I chose a different path to mortgage strategy. My goal has always been to minimize interest expense and gain equity.
This was achieved with the help of a great mortgage broker.
The most important thing is getting the right property; buy in the best location you can because it will be more immune to the inevitable down turns.
Are you planning to stay or is this a 5 year starter house?
A strong down payment gets you started with equity, which is leverage.
I generally took variable, 5 to 7 year fixed to adjustable mortgages and refied when rates went down or I was within a year or 2 of the adjustment to start.
I always made the biggest payment I could; I treated the lower interest rate like a 15 year fixed.
There were times I re-fied within months. Always take a no cost zero point loan. Your money needs to go against the principal!

Most people don't even know 5/1 ARMs exist, and it's definitely a solid strategy. My parents have used this multiple times for better rates when they know they aren't staying long-term (just did it again when they moved a month ago) and it's worked well.

 

[GON]

.

 

[SwampSurvivor]

Realtors - at least in this state - won't even acknowledge you or you a house until you have a preapproval for a certain limit. That's definitely where to start. Sometimes the realtors can give you advice on which banks to start using. In our case, the realtor we used mentioned a local credit union that I never heard of and their rates were .25% lower than anyone else.

Title insurance is a big scam but there's no way out of it. You'll pay for a title search to ensure that the property is unencumbered and no one else has a claim to the property and then you'll pay insurance in case the title search wasn't accurate or complete.

That's true. I ran into a situation selling my old house where the neighbor was encroaching on my property with a driveway. The driveway existed for 50+ years. When I bought the house, my lawyer had the previous neighbor sign an affidavit that he did not claim ownership of that portion of the driveway and would remove it if instructed by me.

I did not know about any encroachment until after closing when I was reviewing the documents. That's something that should have been made known to me in disclosures.

Anyway, the attorney I used to buy the house "forgot" to file that affidavit with the county. The new owner of the property next door wouldn't sign it just to be a jerk because he wanted to buy my house but didn't have the money.

When I called the title insurance company to see if they could do anything for me because I have an unsaleable property for which I cannot get clear title, they invalidated my title insurance because the lawyer forgot to file that affidavit with the county. The problem was, without it filed, if we went to court over adverse possession, he'd win.